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We could not charge everyone exactly what it costs to serve them unless we had different rates for everyone. I think you can understand that, as a practical matter, we have to lump people together in manageable groups. That is why we have our different rate classes which differentiate by our consumers? consumption patterns. After we group our customers into classes, we then analyze the costs to provide service to that class of customer. We don't, for example, determine how much it costs to sell 1000 kWh to a house on Orcas Island compared to Decatur Island. All residential consumers are treated as a class. We recently completed a Cost of Service Study which apportions OPALCO's costs to operate among the various rate classes. When we determine the cost to serve a rate class, we determine a "minimum system". If you can imagine San Juan Island with only one customer on it, and that one customer only had one light bulb in their home, think about what kind of system we would build to serve them. This is the minimum amount of investment that we have to make for everybody whether they use any electricity or not. The minimum system has to exist just in case they want to use electricity. Since minimum system costs are not dependent on the amount of electricity used, they are usually recovered as a consumer charge or a facility charge (in our case $20). As soon as we have more than one home, or people start using significant amounts of electricity, we need to have a system with more "capacity". For example, if we only had one customer in San Juan Island with one light bulb, we would not need large, three phase 69 KV submarine cables. However, all of the homes and all of the businesses on San Juan put a significant load on our system, and the actual system that we build is far larger than the minimum system. The costs to install and operate this larger system are properly recovered through electric charges since, in a broad sense, the amount of power you buy from us indicates the amount of load that you place on our system. I have tabulated below the various costs that make up our $20 front charge for those who really want to know. You will see that it amounts to just under $25. The difference between what we pay BPA (2.8¢ per kWh) and what we sell it to you for (5¢ per kWh) accounts for the increased size of the system that we have had to build to provide reliable service above the simple minimum system that was recovered in our $20 charge.
1996
Remember, this $24.55 only relates to those things that exist or need to be done whether you use any electricity or not. I have probably confused you, but I think it is important that you understand the cost structure and why it is so expensive to get power to your home or business in San Juan County.
Doug Bechtel
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